State pension changes explained by investment advisor
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The state pension helps millions of retired people right across the country – with many reliant on the sum. As such, keeping track of what one is likely to get will be important.
State pension payments will rise this year, but not under the triple lock policy pensioners have come to expect.
Due to warped earnings data because of the pandemic, this component of the policy has been temporarily removed.
Instead, a double lock – looking at 2.5 percent and inflation – was considered by the Department for Work and Pensions (DWP).
It means this year a 3.1 percent increase will be implemented, based on inflation in September 2021 when the decision was made.
But what does this mean in real figures for state pensioners in the coming year?
The state pension is split into two schemes, an older ‘basic’ state pension and the new state pension.
Which one a person gets is based on their date of birth and when they retire.
The basic state pension is available to men born before April 6, 1951 and women born before April 6, 1953.
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The full basic state pension is currently £137.60 per week, but this will rise to £141.85 per week.
The new state pension, however, is able to be claimed by men born on or after April 6, 1951 and women born on or after April 6, 1953.
The Government warns: “If you reached state pension age before April 6, 2016, you’ll get the state pension under the old rules instead.”
Presently, the full new state pension is £179.60 per week, but it will rise to £185.15 per week for the coming year.
The decision on the state pension increase was enabled as the Social Security (Uprating of Benefits) Act 2021 received Royal Assent.
It is worth acknowledging not everyone will receive the full state pension sum, whether through the old or new scheme.
This is because state pension payments are typically based on a person’s National Insurance contributions throughout their lifetime.
As such, people will receive a myriad of different figures depending on how much they have built up.
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The suspension of the triple lock is only a temporary measure, the Government has reassured.
It said: “In taking this decision, the government carefully considered the fairest approach for both pensioners and younger taxpayers, many of whom have been hardest hit by the financial impacts of the pandemic.
“This is a one-year response to exceptional circumstances and the government will return the earnings element of the triple lock next year.”
Aside from the state pension payment, the Government has said the 3.1 percent increase also applies to benefits.
This includes working-age benefits and those issued to help with additional needs.
Pensioner premiums in income-related benefits will also be increased by this measure.
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